Imagine seeing an ad on Facebook for a retailer like American Apparel or Target, and clicking a button to pass a 15-percent-off discount code to someone on your friends list. For advertisers looking to tap into the power of social networks, it sounds tantalizing.

That's the thinking behind "Engagement Ads," the new "experimental" advertising technology that social network Facebook unveiled last week. With the new program, members of Facebook can leave comments on participating ads, add the brands to their list of "fan pages," and use them to send friends virtual gifts. For the social network it's a small but important trial as it continues to combat the common wisdom that sites of its ilk can't survive on ad revenue.

But it's more vital for advertisers, who are eager to tap into the tech-savvy youth demographic that thrives on sites like YouTube and Facebook. "It's critical for (brands) to reach this market. They realize that," said Jeremiah Owyang, the Forrester Research analyst who announced Engagement Ads to the world on his blog last week.

But what Facebook calls "engagement ads" won't be the magical cure, because it simply won't work for most advertisers. Rather, it's a niche option that will probably lead to very successful campaigns for some brands--and high-profile blunders for others.

The reason why Engagement Ads aren't a universal solution is partially because it's tough to start with a little-known company and hope that Facebook users will be spurred to start playing with the ads. For a new movie, for example, the ad could play the trailer. But with other brands it's not so easy. "This is something new that kind of already requires awareness, because a lot of this is driven through peoples' perception of the product," said Dave Gentzel, co-founder of ad start-up SocialMedia, which praised the concept of Engagement Ads early on. In other words, it's tough to get the conversation started when no one's primed to talk about it.

"When you're sharing an affinity for something, it's kind of hard to grasp exactly what new products encompass without knowing what they already are," Gentzel said.

A new company or a brand that's not a household name will have a tough time jumping into the mix, but so will established companies that don't necessarily have public opinion on their side. Owyang suggested that those who fare best will be "brands that have heavy lifestyle affinities," or in non-industry speak, cult followings. That goes for luxury brands, automakers, and clothing lines; it wouldn't apply to brands for which conversations tend to consist of complaints, like cell phone carriers and airlines. (Unless that airline is, say, Southwest Airlines and manages to have eked out a cult following in spite of industry trends.)

Before signing on to something like Engagement Ads, companies need to have a grip on what the public--more specifically, the largely young and Web-savvy people using Facebook regularly--thinks about their products. The reasoning behind this caveat is that when a social advertising campaign falls, it falls hard and loud.

"Brands can't approach this as a one-off," Owyang said. "So thinking that they're going to do Engagement Ads, and that it's going to be success alone, isn't going to be sufficient." A social-media ad campaign can likewise help public perception, but that won't help much if there's already a vocal contingent that's willing to make the conversation take a turn for the worse.

A screenshot from one of the Chevy Tahoe user-generated ads that sparked a social-media disaster.
General Motors

The quintessential example of this is a 2006 promotion by General Motors in which the automaker encouraged fans to "mix" their own video ads for its Chevy Tahoe SUV. Environmentalists, many spurred by activist group ExxposeExxon, caught wind of the gimmick and promptly used it to create anti-global warming ads. Consequently, videos that read "Global warming isn't a pretty SUV ad. It's a frightening reality" were featured right there on the GM-created Web site.

Imagine a similar promotion inadvertently used to further conversations about sub-par restaurant service or dropped calls on a cell carrier, and you've got a bigger problem. But in GM's case, the ads stayed online. And Owyang said that GM's response of leaving the anti-SUV propaganda intact is one to be emulated. "The brands should roll with the negative feedback, and listen, and incorporate some of that feedback in their upcoming products," he explained. "The last thing they should do is shut the ads down."

SocialMedia's Gentzel said that this is a situation that most advertisers aren't familiar with and that debacles like the Tahoe ad campaign could make them more reluctant to dive in. "There's a large amount of social responsibility that comes into play here," he said. "When you're sharing people's opinions and associating them with certain things, it takes a personal attachment that hasn't been used in advertising before." In Engagement Ads, companies can't hand-pick the portfolio of satisfied customers to appear in its commercials; it's handing that duty over to Facebook's hyped "social graph," and there's no clear word on how positive the feedback will be.

Facebook could help on this front, Jeremiah Owyang said. "What they need to do is develop resources for the marketers that will help them be more confident," he explained. "Maybe (the company could) develop a marketing conference for marketers on Facebook. Their developer conference in San Francisco was huge. Why aren't they doing this for the brands?"

The take-home point, really, is that Facebook still considers Engagement Ads to be an "experiment," that the new marketing tool is a small part of an offering that is by no means fully developed, and that interested advertisers should know this. The company's last foray into cutting-edge ads, the "Beacon" program, was a disaster fueled by bad PR. A high-profile Engagement Ads flop--think Tahoe mishap--could be bad news for everyone.

"Facebook is throwing all kinds of pasta at the wall when it comes to marketing and to see what sticks," Owyang said. "They haven't figured it out, and unfortunately, they're using brands as the guinea pigs and their customers. They really have to make it clear to their community what works and what doesn't, and develop best practices sooner or later."

In the meantime, I'm happy to tell my Facebook friends to wait until The House Bunny comes out on DVD.

About the author

Caroline McCarthy, a CNET News staff writer, is a downtown Manhattanite happily addicted to social-media tools and restaurant blogs. Her pre-CNET resume includes interning at an IT security firm and brewing cappuccinos.
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